Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts
Tags: #decision-making #psychology #behavioral economics #poker #uncertainty #risk #learning
Authors: Annie Duke
 (Z-Library)_thumbnail.jpg)
Overview
In “Thinking in Bets,” I share the lessons I learned during my twenty-year career as a professional poker player, applying them to decision-making in all aspects of life. My central argument is that life, like poker, is a game of incomplete information, influenced by both skill and luck. Recognizing this inherent uncertainty and learning to approach decisions as bets can lead to better outcomes, greater objectivity, and a smoother emotional experience. I challenge the common tendency to judge decisions solely on their results, emphasizing the importance of focusing on the decision-making process itself. A good decision doesn’t guarantee a good outcome, and a bad outcome doesn’t automatically mean we made a bad decision. I guide the reader through practical strategies for becoming better decision-makers, emphasizing the importance of calibrating our beliefs to more accurately reflect the world, identifying and mitigating biases, and embracing uncertainty. I introduce tools like truthseeking pods, the CUDOS framework, mental time travel, backcasting, and premortems as valuable strategies for improving decision-making across all aspects of life. While the book draws heavily on my experiences as a poker player, the concepts and strategies I present are broadly applicable to anyone seeking to become a more effective decision-maker, from business professionals and investors to parents and individuals navigating everyday life. The book is particularly relevant in today’s age of information overload and political polarization, where thinking in bets offers a practical approach for navigating uncertainty, promoting accuracy, and encouraging constructive dissent.
Book Outline
1. Life Is Poker, Not Chess
This chapter sets the foundation for the book’s premise by contrasting life’s uncertainties with the clear-cut, deterministic nature of chess. It introduces the concept of resulting: the flawed tendency to equate the quality of a decision with the quality of its outcome. Instead, we must learn to detach the quality of our decisions - which we can control - from the outcomes of those decisions, which are influenced by factors outside of our control. Poker, with its inherent uncertainty and hidden information, provides a better framework for approaching life’s messy decision-making.
Key concept: Life is more like poker than chess. In chess, outcomes correlate more tightly with decision quality. In poker, it is much easier to get lucky and win, or get unlucky and lose. Incomplete information poses a challenge not just for split-second decision-making, but also for learning from past decisions.
2. Wanna Bet?
Here, I introduce the power of betting as a tool for improving decision-making. Not in the literal sense of gambling, but rather in the way we implicitly place bets on our beliefs every time we make a choice. Recognizing this inherent wager helps us approach decisions with greater awareness of uncertainty, calibrate our confidence levels, and be more open to revising our beliefs in light of new information.
Key concept: “Wanna bet?” triggers us to engage in that third step that we only sometimes get to. Being asked if we are willing to bet money on it makes it much more likely that we will examine our information in a less biased way, be more honest with ourselves about how sure we are of our beliefs, and be more open to updating and calibrating our beliefs.
3. Bet to Learn: Fielding the Unfolding Future
This chapter explores the challenge of accurately assessing the reasons behind our successes and failures. We have a natural tendency towards self-serving bias, attributing good outcomes to our skill and bad outcomes to luck. This bias hinders learning and growth. Embracing the concept of luck and acknowledging its influence, along with recognizing that outcomes often result from a combination of factors, helps us move toward greater objectivity and learn from both positive and negative experiences.
Key concept: Fielding outcomes with the goal of promoting our self-narrative and doing it in an all-or-nothing fashion alters our ability to make smart bets about why the future unfolded in a particular way. Learning from experience is difficult—and sometimes impossible—with this kind of biased, broad-brush thinking.
4. The Buddy System
Here, I discuss the importance of creating a truthseeking pod: a group of people committed to honest feedback and helping each other improve their decision-making. Productive groups are built around an explicit agreement to prioritize accuracy and welcome dissenting opinions. A diversity of perspectives and a shared commitment to open-mindedness are essential elements for creating a robust learning environment.
Key concept: “If you put individuals together in the right way, such that some individuals can use their reasoning powers to disconfirm the claims of others, and all individuals feel some common bond or shared fate that allows them to interact civilly, you can create a group that ends up producing good reasoning as an emergent property of the social system.
5. Dissent to Win
Building on the need for a productive group dynamic, I introduce the CUDOS framework for group engagement. Developed by sociologist Robert Merton, CUDOS outlines key principles to maximize truthseeking within a group: open sharing of information, objective evaluation of ideas, awareness of potential biases, and active encouragement of skepticism and dissent. These guidelines can be applied not only to formal decision-making groups but also to informal interactions with family, friends, and colleagues.
Key concept: CUDOS - Communism (data belong to the group), Universalism (apply uniform standards to claims and evidence, regardless of where they came from), Disinterestedness (vigilance against potential conflicts that can influence the group’s evaluation), and Organized Skepticism (discussion among the group to encourage engagement and dissent).
6. Adventures in Mental Time Travel
This chapter focuses on using mental time travel to improve decision-making. We can harness the power of future-thinking to avoid impulsive decisions driven by immediate gratification, as illustrated by the example of temporal discounting. Similarly, techniques like backcasting (imagining a desired future and working backwards) and premortems (envisioning potential failures) can help us anticipate challenges, identify crucial steps, and prepare contingency plans.
Key concept: The best poker players develop practical ways to incorporate their long-term strategic goals into their in-the-moment decisions. The rest of this chapter is devoted to many of these strategies designed to recruit past- and future-us to help with all the execution decisions we have to make to reach our long-term goals.
Essential Questions
1. How is life like poker, and why does that matter for decision-making?
The book’s central premise is that life, like poker, is a game of incomplete information and luck plays a significant role in outcomes. We often fall into the trap of “resulting,” equating the quality of a decision with its outcome. However, good decisions can lead to bad results, and vice versa. To become better decision-makers, we must learn to separate decision quality from outcome quality, recognizing that we can only control our decisions, not the outcomes. Poker, with its inherent uncertainty, offers valuable lessons for navigating life’s decisions.
2. How can thinking in bets improve our decision-making process?
We implicitly bet on our beliefs every time we make a decision. Acknowledging this inherent wager helps us become more aware of the uncertainty involved and encourages us to think critically about the basis for our beliefs. This shift in mindset promotes intellectual humility, prompting us to consider alternative perspectives, gather more information, and calibrate our confidence levels to better reflect the true probabilities.
3. How does self-serving bias affect our ability to learn from experience?
Our natural tendency towards self-serving bias - attributing success to skill and failure to luck - hinders learning and growth. To counteract this bias, we must embrace uncertainty and accept that luck plays a role in all outcomes. By acknowledging that both skill and luck influence results, we can field outcomes more objectively, learn from both positive and negative experiences, and improve our decision-making process over time.
4. What is a truthseeking pod, and why is it valuable for improving decision-making?
A truthseeking pod is a group of individuals committed to helping each other improve their decision-making by providing honest feedback and challenging each other’s biases. Productive groups are built on a shared commitment to accuracy, open-mindedness, and a willingness to consider alternative perspectives. Diversity of viewpoints is essential for combating confirmatory thought and promoting a more objective view of the world.
5. How can mental time travel enhance our decision-making process?
Mental time travel involves incorporating our past and future selves into our present decision-making. We can use techniques like backcasting (imagining a desired future and working backward) and premortems (envisioning potential failures) to become less reactive to short-term outcomes and make choices that align with our long-term goals. This approach helps us to mitigate temporal discounting, overcome the urge for immediate gratification, and make more rational decisions.
Key Takeaways
1. Embrace both positive and negative feedback
The book stresses that learning from both successes and failures is crucial. We should analyze good outcomes to identify areas for potential improvement and bad outcomes to understand the causes and prevent repeating mistakes. This approach leads to continuous learning and better calibration of our future decisions.
Practical Application:
In product development, instead of solely focusing on a product’s projected success, a team can conduct a premortem by envisioning the product failing and exploring all the potential reasons why. This exercise could uncover design flaws, market misjudgments, or competitor threats that might have been overlooked, allowing for adjustments in the product development process.
2. Seek diverse perspectives and foster constructive dissent
The book highlights the importance of seeking diverse perspectives and fostering a culture of constructive criticism to improve decision-making. A truthseeking pod, a group committed to open-mindedness and accountability, can help us to identify biases, consider alternative hypotheses, and move towards a more accurate understanding of the situation.
Practical Application:
When working on an AI project, forming a team with diverse skillsets and perspectives is crucial. Encourage open dialogue and constructive criticism within the team. By actively seeking out dissenting opinions and engaging with them respectfully, the team can improve the accuracy and robustness of their AI models and avoid potential pitfalls.
3. Think long-term and consider future consequences
This emphasizes the importance of considering the long-term consequences of our decisions. We often prioritize immediate gratification, but incorporating our future selves into our decision-making helps us make choices that align with our long-term goals.
Practical Application:
In developing AI products, it is essential to consider long-term implications and potential unintended consequences. By engaging in mental time travel, envisioning how the AI product might be used or misused in the future, designers can proactively address ethical concerns, mitigate risks, and build safer and more beneficial AI systems.
Suggested Deep Dive
Chapter: Chapter 4: The Buddy System
This chapter explores the power of collaborative truthseeking, which is especially relevant for AI product development where diverse perspectives and a shared commitment to accuracy are crucial for mitigating bias and ensuring the ethical development and deployment of AI systems.
Memorable Quotes
Chapter 1: Life is Poker, Not Chess. 7
Pete Carroll was a victim of our tendency to equate the quality of a decision with the quality of its outcome. Poker players have a word for this: “resulting.”
Chapter 1: Life is Poker, Not Chess. 29
“I’m not sure” does not mean that there is no objective truth. Firestein’s point is, in fact, that acknowledging uncertainty is the first step in executing on our goal to get closer to what is objectively true.
Chapter 2: Wanna Bet?. 46
One of the reasons we don’t naturally think of decisions as bets is because we get hung up on the zero-sum nature of the betting that occurs in the gambling world…In most of our decisions, we are not betting against another person. Rather, we are betting against all the future versions of ourselves that we are not choosing.
Chapter 2: Wanna Bet?. 64
We would be better served as communicators and decision-makers if we thought less about whether we are confident in our beliefs and more about how confident we are.
Chapter 6: Adventures in Mental Time Travel. 151
Just as we can recruit other people to be our decision buddies, we can recruit other versions of ourselves to act as our own decision buddies.
Comparative Analysis
Thinking in Bets aligns with other notable works in decision-making and behavioral science, such as Daniel Kahneman’s Thinking, Fast and Slow, and Nassim Taleb’s Fooled by Randomness. Like these authors, Duke emphasizes the pervasiveness of uncertainty and the limitations of human rationality. However, her unique contribution lies in the practical application of poker strategies to real-world decision-making. While Kahneman focuses on cognitive biases and Taleb on the impact of randomness, Duke offers a structured framework - thinking in bets - and actionable tools like truthseeking pods and premortems to improve decision quality. She also diverges from the often pessimistic tone of other behavioral scientists, offering an optimistic view that even small improvements in our decision-making process can have a significant cumulative impact on our lives.
Reflection
Thinking in Bets offers a compelling and practical approach to improving decision-making in all aspects of life. Duke’s insights, grounded in her extensive experience as a poker player, are both insightful and actionable. While the book’s strengths lie in its clear explanations, relatable anecdotes, and practical tools, it could be argued that the poker analogy, while effective, might not resonate with all readers. Additionally, the book’s focus on uncertainty and the limitations of human rationality might seem overly pessimistic to some. Nevertheless, Duke’s optimistic message - that even small improvements in our decision-making process can have a significant cumulative impact - provides a hopeful counterpoint. Overall, “Thinking in Bets” offers valuable lessons for anyone seeking to navigate life’s uncertainties with greater skill and wisdom, particularly relevant in the field of AI where managing uncertainty and mitigating biases are crucial for building responsible and effective systems.
Flashcards
What is resulting?
The tendency to equate the quality of a decision with the quality of its outcome.
What is a bet?
A choice made by thinking about what will probably happen; to risk losing something when you try to achieve something.
What is a truthseeking pod?
A group of individuals committed to honest feedback and helping each other improve their decision-making.
What are the four elements of the CUDOS framework?
Communism (data belong to the group), Universalism, Disinterestedness, and Organized Skepticism
What is temporal discounting?
The tendency to favor our present-self at the expense of our future-self.
What is backcasting?
Imagining a desired future and working backward to identify the steps to get there.
What is a premortem?
Imagining potential failures and analyzing the reasons why a decision or plan might go wrong.